AstraZeneca to buy Cambridge Antibody in full

London, May 15 | Updated: May 16 2006, 05:55am hrs
AstraZeneca Plc, the UKs second-largest drugmaker, agreed to buy the rest of Cambridge Antibody Technology Group Plc for 567 million pounds ($1.07 billion) to gain control of the first UK biotech company to develop a $1 billion drug.

Investors in the Cambridge, England-based company will get 1,320 pence for each of their shares, AstraZeneca said on Monday. Thats 67% more than the biotechs 791 pence closing price last week, valuing it at 702 million pounds. London-based AstraZeneca bought a 19.2% stake in CAT in November 2004.

The companies are already researching drugs for asthma and other inflammatory disorders as part of a five-year agreement. Cambridge Antibody developed Humira, an arthritis treatment that brought in $1.4 billion for partner Abbott Laboratories last year. AstraZeneca wants to use the biotechs research techniques as its three best-selling medicines face legal challenges from generic-drug makers and setbacks with two newer products.

Theyre probably paying a bit over the top, Paul Diggle, a Nomura Code analyst with a reduce recommendation on AstraZeneca said in an interview. I certainly dont see that they have very many other options.

In November 2004, AstraZeneca purchased a stake in the company, and agreed not to own more than 19.9% for another 36 months. Jon Symonds, AstraZenecas finance director, said the drugmaker paid a full price for Cambridge Antibody on Monday.

The price reflects the value that AstraZeneca sees in CATs early stage research, said Karl Keegan, an analyst at Canaccord in London, who has a buy rating on Cambridge. Its going to be a significant boost to UK biotech.

AstraZenecas Nexium for ulcers, Seroquel for schizophrenia and Toprol-XL for hypertension are facing legal challenges to their patents. The company dropped the blood thinner Exanta and stopped work on the Galida diabetes medicine this year.

Sealing A Deal
Deal size $1.07 billion
Investors in CAT will get 1,320 pence for a share, 67% more than the biotechs 791 pence closing price last week
Why is the deal important
AstraZeneca wants to use the biotechs research techniques as its three best-selling medicines face legal challenges and setbacks with two newer products
CAT-354, which is in the second of three phases of testing generally needed for regulatory approval, is forecast to reach sales of $1 billion by analysts
CAT is one of only four companies globally that has human monoclonal antibody technology
The acquisition of Cambridge Antibody adds an experimental treatment for severe asthma. CAT-354, which is in the second of three phases of testing generally needed for regulatory approval, is forecast to reach sales of $1 billion by analysts including Keegan.

The premium is attributable to CATs late stage pipeline and technology, Symonds said in an interview. This broadens our vista.

Treatment of asthma has remained virtually unchanged for a long period and the emphasis is firmly in symptomatic treatment rather than disease modification, Keegan said. CAT, through its antibody CAT-354, may offer AstraZeneca an opportunity to move significantly to the forefront of the research field.

Cambridge Antibody specialises in developing antibody-based treatments. Antibodies are the immune systems response to infections or foreign molecules, and drugmakers are trying to harness their power to fight disease.

CAT is one of only four companies globally that has human monoclonal antibody technology, Max Herrmann, analyst at ING Fnancial markets said in an interview. This is a longer term deal to provide them with an internally generated pipeline in biologicals, Herrmann said.

AstraZeneca aims to have 1 in 4 of its future development projects to come from biologics from 2010, John Patterson, AstraZenecas head of drug development, said in an interview.

Cambridge Antibody is also developing cancer treatment CAT-3888 and other compounds for diseases including Crohns, muscular dystrophy and psoriasis.

The success of the collaboration over the last two years has demonstrated AstraZenecas and CATs complementary skills and expertise, Brennan said in the statement.

Cambridge Antibody had net income of 3.08 million pounds in the fiscal first quarter ended December 31, compared with a loss of 11.3 million pounds in the year-earlier period. Revenue was 14 million pounds compared with 2.7 million pounds. AstraZeneca is being advised by Goldman Sachs Group Inc., while Morgan Stanley advised Cambridge Antibody.

Bloomberg